"Price discovery is not a sexy function of markets, but it is critical to the efficient allocation of scarce capital and resources, and to the preservation of the long term wealth of investors and the economy as a whole. If price discovery is compromised by manipulation, then we will all be gradually impoverished and the economy will be imbalanced and unstable.
Over the past 25 years the forces of regulatory liberalisation and demutualisation of markets have allowed the largest global banks to set the rules, processes and infrastructure of global markets to their own self-interested requirements."
London Banker, Lies, Damn Lies, and LIBOR
"Plus ça change, plus c'est la même chose."
Jean-Baptiste Alphonse Karr, Les Guêpes
Today was the end of the third quarter. As usual the paint was going on the tape again to make those end of quarter results look better, or at least less bad.
The big shorts in the gold and silver markets, primarily on the Comex, managed to continue the knockdown of the metals that began with the October option expiration last week. see the Dr Evil strategy for details about this.
'Golden Week', a seven day national holiday in China, begins on October 1. There markets are closed. This provides a good cover for the paper trading to be conducted without undue physical buying pressure. Although the rise and steady level of gold inventories in the Comex Hong Kong has been notable.
There was a huge amount of gold contracts changing hands on the Comex last Friday. The big seller was customers at JPM and the house account at HSBC. I have included that clearing report below.
The big gold contract buyers were the house accounts at JPM, Goldman, Citi, and MacQuarie. Presumably some of this was short covering.
I would imagine that the price smackdown today and the past few trading sessions will have knocked down the number of longs being held in both gold and silver.
The Dollar was up marginally, as were stocks, and the VIX drifted lower.
There will be a Non-Farm payrolls report on Friday.
I was closed out of the remaining trading position I had long gold in the opening minutes today, on a tight stop. A good chunk of it went out on Friday. I will be looking for a re-entry point. Carefully.
My thoughts on the markets with regard to support and resistance levels are marked on the charts below.
Have a pleasant evening.
